Any organization should have a person with the ability and knowledge in the field of researching economic indicators. It is also responsible for conducting cost analysis. The dynamics of costs is a kind of "pulse" of the organization, which needs to be monitored, and there are special methods for this.
Instructions
Step 1
The horizontal analysis is performed first. Put the reporting documents in front of you and compare the absolute indicators of expenses in numerical terms during the analyzed period. If there have been abrupt changes, then it is necessary to consider in the study even the time before the beginning of the period under consideration. It is at this stage of the analysis that the goals of the subsequent work are verbally formulated, since the initial assessment of the financial situation in the organization is made. However, horizontal analysis alone is not enough, it is necessary to continue research at a deeper level.
Step 2
Perform vertical analysis. Calculate the specific weight of different types of expenses in their total amount. Distinguish between ordinary, non-operating, operating and extraordinary expenses. Ordinary costs are associated with the direct production of goods and services. Non-operating expenses are not related to the sale of goods, they include rental fees, interest on loans, legal costs. Operating expenses are the costs of an organization for its normal functioning, which are required on a daily basis, but are also not directly related to the production of goods and services. For example, the cost of calculating wages, deductions for social events, depreciation.
Step 3
You also need to analyze the individual expenses in each type of expense, this allows you to identify unwanted trends in the early stages of the problem. Often, at this stage of the analysis, it is possible to identify inappropriate spending and see a threat to the well-being of the organization.
Step 4
To find out the root causes of changes in cost indicators, it is often necessary to conduct a factor analysis of costs, which is better to be entrusted to professionals. They will identify the relationship of variables and draw conclusions about which indicators need to be changed to make spending more appropriate.
